Second Quarter 2011 Results 23 August 2011 Disclaimer Information - - PowerPoint PPT Presentation

Second Quarter 2011 Results

23 August 2011

Disclaimer

Information contained in our presentation is intended solely for your reference. Such information is subject to change without notice, its accuracy is not guaranteed and it may not contain all material information concerning the Company. Neither we nor our advisors make any representation regarding, and assumes no responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any information contained herein. In addition, the information may contain projections and forward-looking statements that reflect the company’s current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks factors and which may change over time. No assurance can be given that future events will occur, that projections will be achieved, or that the company’s assumptions are correct. Actual results may differ materially from those projected. This presentation can be distributed without any consent of the Company as this is a publicly available announcement.

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2Q11 Results – Key Highlights

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 Malaysia – Higher Passengers growth drives up revenue



Profit before tax of RM145 mil up 1% y-o-y



Operating profit of RM215 million down 3 % y-o-y



Passenger volume grew by 15% y-o-y, achieving 81% load factor



RASK (RM sen) up 6% despite tough fuel environment of average fuel price of US$140 per barrel in 2Q11 compared to US$106 per barrel in 2Q10

 Thailand – Exceeding expectations - strong y-o-y performance



Profit before tax of THB386 mil, up 862% y-o-y



Operating profit of THB315 million recording 123% y-o-y growth



Balance of RM70 million unrecognised share of net profit before it can be equity accounted



Passenger volume grew by 30% y-o-y, achieving 78% load factor



RASK (THB) up 14% contributed from stronger ancillary income per pax

 Indonesia – Managing capacity in line with growth



Profit before tax of IDR41,690, down 48%



Operating profit of IDR45,254 million down 54% y-o-y due to higher fuel cost



Passenger volume grew by 33 y-o-y, achieving 76% load factor



RASK (IDR) up 2% y-o-y due to high ancillary income contribution

 Ancillary Income per pax increase for all three operations

MAA – up 15% TAA – up 30% IAA – up 10%  Further reduction in gearing to 1.48 times from 2.27 times y-o-y; TAA paid off intercompany dues  Largest aircraft orders of 200 A320 Neo to support the vast Asia region  AirAsia and ANA forms joint venture Japan AirAsia  Hedged up to 26% via Jet Kerosene (~US$120 / barrel) and Brent fixed swap (~US$112 / barrel) up to 4Q11

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2Q11 Results – Financial Results

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MAA

RM’000

TAA

THB’000

IAA

IDR million 2Q11 2Q10 Change 2Q11 2Q10 Change 2Q11 2Q10 Change Revenue 1,075,622 933,402 15% 3,760,162 2,620,044 44% 895,254 653,988 37% EBITDAR 372,842 362,565 3% 990,591 678,650 46% 211,569 217,355

• 3%

Operating Profit 214,803 222,557

• 3%

315,328 141,294 123% 45,254 98,630

• 54%

Profit after tax 104,258 198,930

• 48%

384,444 39,420 875% 41,690 80,409

• 48%

EBITDAR margin 35% 39%

• 4 ppt

26% 26%

• 24%

33%

• 9 ppt

Operating profit margin (EBIT) 20% 24%

• 4 ppt

8% 5% 3 ppt 5% 15%

• 10 ppt

MAA  Revenue up 15% y-o-y driven by strong contributions from ancillary income  Net Income down 48% y-o-y due to Deferred tax cost as no aircraft was delivered in 2Q11 TAA  Revenue grew 44% y-o-y driven by increased fares and ancillary income per pax  EBIT margins up 3 ppt respectively despite high fuel cost IAA  Revenue up 37% contributing from higher passenger growth  Operating profit margins down 10 ppt due to increase in fuel expense

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2Q11 Results – Operational Statistics

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77% 78% 82% 80% 81% 75% 76% 80% 84% 78% 75% 81% 78% 79% 76% 65% 70% 75% 80% 85% 90% Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

Load Factor (%)

MAA TAA IAA

Average Quarter Weak Quarter Strong Quarter Weak Quarter

 Fuel Surcharge imposed in 2 May 2011, 1H11 load factor remains strong in line with its load active yield passive strategy  Seasonally weaker quarter for Malaysia and Thailand but Load factor remains strong at 81% and 78% respectively but Indonesia moving heading its strongest 3Q11.

Strong Quarter

MAA = Mean 80% TAA = Mean 79% IAA = Mean 78%

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2Q11 Results – Operational Statistics (RASK vs CASK)

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 RASK for the all three operations in 2Q11 has outperform 2Q10 and 3Q10 contributed from ancillary income & increased passengers.  CASK for 2Q11 has increased y-o-y due to average price of per barrel of fuel increased from US$106 to US$140 y-o-y

4.86 4.54 4.40 5.16 4.77 4.95 5.81 5.70 4.76 5.40 5.89 4.48 5.57 5.55 4.74 3.70 4.29 4.03 3.86 4.12 4.17 3.36 4.26 4.76 4.15 4.67 4.47 4.46 5.10 4.71

1 2 3 4 5 6 7 MAA TAA IAA MAA TAA IAA MAA TAA IAA MAA TAA IAA MAA TAA IAA

RASK & CASK

RASK CASK

2Q10 1Q11 4Q10 3Q10 2Q11

Average Quarter Strong Quarter Weak Quarter Strong Quarter Weak Quarter

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2Q11 Results – Operating Statistics (Highlights)

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MAA TAA IAA

2Q11 2Q10 Change 2Q11 2Q10 Change 2Q11 2Q10 Change Passengers Carried 4,472,498 3,893,476 15% 1,614,853 1.237,952 30% 1,259,737 947,786 33% Capacity 5,511,780 5,050,440 9% 2,063,160 1,651,192 25% 1,647,904 1,269,112 30% Load Factor 81% 77% 4 ppt 78% 75% 3 ppt 76% 75% 1 ppt RPK (million) 5,250 4,317 22% 1,774 1,301 36% 1,664 1,228 35% ASK (million) 6,436 5,943 8% 2,235 1,780 26% 2,205 1,637 35% Average Fare (RM/THB/IDR) 164 173

• 5%

1,924 1,804 7% 570,987 563,219 1% RASK (sen/THB/IDR) 16.71 15.71 6% 1.68 1.47 14% 405.98 399.41 2% CASK (sen/THB/IDR) 13.38 11.96 12% 1.54 1.39

• 11%

385.46 339.17 14% CASK Ex-fuel (sen/THB/IDR) 6.51 6.60

• 1%

0.81 0.85

• 4%

196.86 187.42 5%

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YTD’ 11 Results – Financial Results & Operating Statistics

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MAA

RM’000

TAA

THB’000

IAA

IDR million YTD’11 YTD’10 Change YTD’Q11 YTD’Q10 Change YTD’Q11 YTD’10 Change Revenue 2,123,564 1,804,007 18% 7,846,494 5,685,653 38% 1,670,099 1,217,490 37% EBITDAR 771,497 666,189 16% 2,506,893 1,662,072 51% 382,914 354,592 8% Operating Profit 456,522 387,612 18% 1,160,584 593,036 96% 54,034 113,255

• 52%

Profit after tax 276,188 423,041

• 35%

1,193 582,899 105% 72,000 74,950

• 4%

Passenger Carried 8,790,832 7,578,865 16% 3,432,338 2,719,063 26% 2,353,380 1,841,167 28% Capacity 10,926,900 10,067,220 9% 4,217,940 3,473,888 21% 3,036,492 2,503,132 21% Load Factor 80% 75% 5 ppt 81% 78% 3 ppt 78% 74% 4 ppt

YTD’Summary  For MAA, PAT is down 35% y-o-y mainly due to deferred tax in 1H11 being recognised as cost due to minimal aircraft delivered compared to 1H10  Load factor of 80% within the company’s target for 2011.  Phenomenal performance for TAA with 103% growth y-o-y

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CASK Breakdown

Cost / ASK (US cents) MAA TAA IAA 2Q11 2Q10 2Q11 2Q10 2Q11 2Q10

Staff Costs 0.57 0.47 0.55 0.50 0.51 0.36 Depreciation 0.74 0.68 0.03 0.05 0.03 0.03 Aircraft Fuel Expense 2.29 1.78 2.40 1.79 2.20 1.77 Aircraft Operating lease expense 0.08 0.10 0.97 0.94 0.85 0.82 Maintenance, Overhaul, User Charges and other related expense 0.41 0.55 1.11 1.20 0.83 0.86 Travel and tour operations expenses 0.10 0.09

• Others Operating Expenses

0.24 0.21 0.16 0.21 0.13 0.13 Other (losses)/ gains -net 0.13 0.14

• Other Income

(0.09) (0.04) (0.13) (0.08) (0.05) (0.01) Total Cost / ASK 4.46 3.98 5.09 4.60 4.50 3.96

MYR :USD – 3.00 THB: USD – 30.30 IDR :USD – 8,569

 Fuel expense MAA, TAA, IAA increased to 51.3%, 47.1% and 48.9% of total cost respectively due to high average fuel prices in 2Q11.  Staff cost in all operations rose an average of 12% of total cost mainly due to increase payroll in flight

• perations and cabin crew

 All three operations saw maintenance, overhaul, user charges and other related expense reduce due to:- MAA – Airport incentives and lower routes charges TAA and IAA – Lower maintenance from new A320’s compared to B737s

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2Q11 Results – Ancillary Income

9 Q1-2009 Q2-2009 Q3-2009 Q4-2009 Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011 MAA 29 27 36 25 38 43 45 49 51 50 TAA 19 20 19 18 28 31 34 28 36 40 IAA 25 23 31 27 37 45 39 52 52 49 10 20 30 40 50 60 RM per pax MAA TAA IAA

Ancillary per pax growing in terms of revenue!  ASSIGNED SEATING : MAA = up 77% y-o-y, TAA = up 106% y-o-y, IAA = up 47.9% y-o-y ( More Take-up rates from business passengers)  BAGGAGE SUPERSIZE : MAA = up 14% y-o-y, TAA = up 41% y-o-y, IAA = up 13% y-o-y (Due to higher take-up)  INFLIGHT MEALS : MAA = up 68% y-o-y, TAA = up 32% y-o-y, IAA = up 19% y-o-y (Stronger demand due to more variety of food and more discounted pre-booked food)  CARGO : MAA up 13% y-o-y (Gaining market share)

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2Q11 Results – Gearing Level

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 Gearing level reduced to 1.48 times from 2.27 times y-o-y  Achieved cash up to RM2.1billion

• Cash balance of RM1.86 billion as at end 2Q11
• Including deposits on aircraft purchases, total cash is close to RM2.1 billion

 Affiliates paying down amount due

• TAA PAID OFF all their outstanding debt
• Only amount due from IAA remaining at RM238 million

5,200 5,400 5,600 5,800 6,000 6,200 6,400 6,600 6,800 7,000 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011

Net Debt & Net Gearing

Net Debt 3.50 2.60 2.62 2.25 2.27 2.02 1.75 1.57 1.48 Net Gearing

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AIRASIA GROWTH STORY

Forward Bookings

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 Forward bookings in 2Q2011 remains strong. In September for MAA and IAA, slightly down y-o-y mainly due to Hari Raya holidays starting end August instead.  Focus on optimizing load factor via revenue management (High peak, low peak, promotional fares)

Thailand Indonesia Malaysia

SEP OCT NOV 48% 28% 19% 43% 27% 24% 2010 2011 SEP OCT NOV 33% 27% 16% 36% 23% 20% 2010 2011 SEP OCT NOV 59% 36% 21% 47% 31% 25% 2010 2011

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AirAsia’s biggest order with Airbus

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 AirAsia Group has recently signed the biggest aircraft order with Airbus with an expected 200 Airbus A320 Neo

 A320 Neo is expected to deliver the following improvements:-

• 15% reduction in fuel consumption per aircraft
• Additional range of up to 500 nautical miles (approx 950 km) or 2 tonnes more payload
• Lower operating costs
• Reduction in engine noise and emissions

 A320 Neo to be powered by CFM LEAP – X1A26

• CFM provides more comprehensive engine service and saving solutions

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Fleet Strategy

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AirAsia Group has the biggest and youngest fleet among the LCC’s in the region of below 3 years

10 15 13 17 18 20 14 18 19 20 21 23 24 24 24 9 5 10 15 20 25 30 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 No of aircraft

 10 Aircraft deliveries 2011

• Allocation:- MAA – 3 aircraft ; TAA – 3 aircraft; IAA - 2 aircraft ; PAA – 2 aircraft
• Financing all secured for 2011

 15 Aircraft deliveries in 2012

• Proposed Allocation:- MAA – 4 aircraft ; TAA – 4 aircraft; IAA - 5 aircraft ; PAA – 2 aircraft
• Financing secured for 2012

 AirAsia Group has 95 aircraft spread across 12 hubs  284 (84 A320 & 200 A320 Neo) more undelivered aircraft to feed into all the AirAsia operations in Asia  Some aircraft deliveries has been accelerated forward to 2012 to cater for high demand

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AirAsia Joint Ventures – Recognised model

49% 49% 40% 49% 40%

AirAsia Thailand

• Bangkok,

Phuket, Chiang Mai as Hub

• Key

passengers

• 55% domestic 45 %

International

• 20 A320 aircraft
• IPO scheduled for

4Q11 AirAsia Indonesia

• Jakarta, Bandung,

Surabaya, Medan, and Bali as Hub

• Key markets - 65%

domestic 35 % International

• 20 A320 aircraft &

4 B737

• IPO scheduled for

1Q12 AirAsia Philippines

• Start Operations 4Q11
• Clark as Hub
• Target

international market first with connecting to existing network

• Just received its first

A320 in August to begin test flights AirAsia Vietnam

• Start Operations 1Q12
• Ho Chi Minh as Hub
• Target

international market first with connecting to existing network and few domestics routes

• Looking

to acquire/lease third party aircraft in 2012 AirAsia Japan

• Start Operations 3Q12
• Narita as Hub
• Target

mainly domestic market and connecting into new and existing international destination

• Working with ANA to

acquire aircraft

AirAsia will continue to explore other potential for JV globally

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NEW Joint Venture - AirAsia Japan

Japan JV  Target Launch March 2012  Narita, Tokyo as its first hub  Partnering All Nippon Airways

• Flies to 76 domestic and international routes
• Network of 164 routes
• 228 aircraft
• 42 million passengers carried in 2010
• USD 272 million Net income in 2010
• USD 8.73 billion Market Capitalisation

 Key investment consideration

• ANA and AirAsia to have unparallel network domestic and international
• Further brand creation into North Asia
• Accessing a population of over 128 million people
• Partial open skies policy with South Korea, Japan and China
• Execution of AirAsia strong LCC model
• ANA to assist getting routes and operations

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Monetising Ancillary business

Overview of AirAsia Go / Expedia JV  Launch in August  JV will combine AirAsiaGo with Expedia-branded storefronts in Japan, India, and ASEAN

• - AirAsia will contribute AA and AAX inventory and commission from ancillary sales
• - Expedia, Inc. will also contribute: hotel inventory at cost, technology solution

 Capex requirements for the JV expected to be minimal Overview of AirAsia Loyalty programme  Launch 4Q11  A programme in which members can earn points to redeem for flights and other awards  BIG will partner with merchants to allow members to earn at many places  BIG card will have a pre-paid debit card function where available (only Malaysia today), powered by a partner Overview of AirAsia Academy JV with CAE  JV has begun strategising its expansion plans  Satisfy AirAsia’s training needs but also capitalize on regional 3rd party training upside  Preferential training rates for AirAsia driven by JV’s higher asset utilization and lower maintenance spend

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AirAsia an ASEAN Airline – Asean office

Key Strategies of ASEAN office

 Team to position AirAsia as more than an ASEAN airline but also as an ASEAN company  Team to spearhead ASEAN initiatives in AirAsia and promote the airline as a regional brand and huge economic contributor to the region  Liaison arm to work with governments, civic organizations, interest groups and communities for issues concerning aviation and tourism as well as CSR projects  Team to closely monitor economic and socio-political developments in ASEAN

Our Vision

 Inculcate the ASEAN ethos more deeply throughout the Group  Nurture an ASEAN “sensitivity” in all affiliates in their strategy and operations  Enhance AirAsia’s commitment to the communities of the region  Set regional direction for growth  Strategize and plan regional policies

• Regional branding
• Truly ASEAN airline and company
• Home grown, world class

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Malaysia – Regional leader in aviation Industry

AirAsia & MAS Collaboration KEY BENEFITS from collaboration for AirAsia

• AirAsia to continue focusing on its core competencies of its LCC business with the Tony Fernandes

as Group CEO and Kamarudin Meranun as Deputy Group CEO

• Support from Government corridors such as Khazanah and Malaysian Airports
• Open routes rights – no barriers
• Less time negotiating with government and more focused on business operations
• Yields to normalise which will improve top line as unrealistic price war is eliminated
• Airport infrastructure upside – more LCC Airports
• Fulfilling its vision to be the main LCC carrier in Malaysia

KEY BENEFITS from collaboration for both airlines

• Full potential to maximise brand
• Synergies to further streamline or reduce operating cost
• Service synergies between two airlines with regards to Training, Cargo, MRO, Catering
• Routes synergies
• Joint Procurement

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Key Strategies for AirAsia Group

MALAYSIA

 Focus on building domestic market and strengthen other hubs  Add more frequencies on key domestic east Malaysia and trunk international routes  Focus on shorter routes – less than 3 hours THAILAND  Building domestic market which is very profitable for Thai AirAsia  Build North Indian market from Thailand – attractive yields  Optimising fleet management to compete with other competitors INDONESIA  Main focus on international routes; but also looking at unique domestics routes and routes underserved by other airlines.  Focus on yield management in line with growth of domestic competitors  Plan to return all Boeing B737s by year end which will reduce cost structure

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Our Vision

 AirAsia is already a regional leader in the LCC space

• Expanding the AirAsia Brand and model to other regions
• To have unparalleled network via JV model and hubs structure

 AirAsia will continue to be an independent run airline in Malaysia and the region  The management and the team at AirAsia will continue to strive to make AirAsia become one of the world’s largest airlines

• Tony and Kamarudin to remain focus on AirAsia’s vision despite its other business

ventures like Formula 1, Moto GP, Soccer, Basketball and other business ventures

• 284 aircraft to be delivered to feed into the ASEAN and Asia region
• Potential to explore further aircraft acquisition in line with growth

 Forming synergistic alliances and monetising AirAsia’s business

• Synergies with other strategic airlines
• Additional partnerships for new markets; M&A
• Monetising ancillary business with strategic partners which allows management to

focus on the core business

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Thank You

Appendix

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Overview

 AirAsia has investments of 48.9% in both TAA and IAA  The aviation laws of Thailand and Indonesia require foreign shareholdings to not exceed 50%

interest in these entities

 Based on the shareholders’ agreements for these entities, TAA is considered to be a jointly

controlled entity and IAA is considered to be an associate of AirAsia.

 The basis of this consideration is due to the various covenants in the agreements whereby in the

case of TAA, key decisions are taken jointly and in the case of IAA, AirAsia has only significant influence

Accounting Considerations

 AirAsia’s accounting treatment for its investments in IAA and TAA is in full compliance with

International Financial Reporting Standards (“FRS”)

 The IFRS applied are FRS 131 “Accounting for Jointy Controlled Entities” (IFRS 31) which applies

to TAA and FRS 128 “ Accounting for Associates” (IFRS 28) which applies to IAA

 TAA and IAA are accounted for using the equity method of accounting per the respective

Standards

 Consolidation of TAA and IAA is strictly prohibited by the IFRS unless the shareholder

arrangements change, which result in AirAsia having control. AirAsia can account for all the losses of TAA and IAA if it assumes obligations for all liabilities of TAA and IAA which will

• bviously be detrimental to the shareholders of AirAsia

Accounting for TAA and IAA

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Equity Accounting

 The equity method is a method of accounting whereby the investment is initially recognised

at cost and adjusted thereafter for the post-acquisition change in the investor’s share of net assets of the investee. The profit or loss of the investor includes the investor's share of the profit or loss of the investee.



FRS 128 and FRS 131 provide that if an investor’s share of losses of an associate or jointly controlled entity equals or exceeds its interest in the associate, the investor discontinues recognising its share of further losses unless the investor has incurred legal or constructive

• bligations or made payments on behalf of the associate.



Consequently, as the share of losses for both TAA and IAA have exceeded the cost of investment in these entities, AirAsia has in prior years fully provided for the cost of investment in both TAA and IAA (amounting to RM12 million and RM4 million respectively), and discontinued its recognition of share of any further losses, as required by the Standard, as it has not provided any legal or constructive obligations or made payments on behalf of the associate or jointly controlled entity.

Accounting for TAA and IAA (continued)